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Last Updated: Tuesday, 15 March, 2005, 14:51 GMT
Rosneft sues Yukos over tax row
Rosneft's Moscow HQ
Rosneft is struggling with debt and is meeting its bankers soon
Russian state oil firm Rosneft is suing Yukos for $11bn (5.7bn) to cover the back-tax bills of Yuganskneftegaz.

Rosneft's purchase of Yuganskneftegaz, which pumped two thirds of Yukos' oil, followed the firm's seizure and auction by tax officials in late 2004.

Yukos has issued a statement dismissing Rosneft's case as "ridiculous and totally unfounded".

Yukos said it remains the rightful owner of Yuganskneftegaz, which Rosneft has "confiscated".

"To steal our asset and then file a false and unfounded multi-billion dollar lawsuit against Yukos accusing our company of acting unlawfully in the operation of that asset is ludicrous," said Yukos spokesman Alexander Shadrin.

Debt talks

According to a report in the daily Vedomosti newspaper, Rosneft's law suit alleges that since Yukos executives mismanaged their main oil production division, Yukos should pay the tax demands.

Rosneft's suit also argues that Yukos underpaid for oil from its main production division, and therefore owes Rosneft money.

Rosneft is itself in financial trouble. Its president, Sergei Bogdanchikov, is due to meet international bankers - among its creditors are Deutsche Bank, Citigroup and Societe General - in Moscow on Thursday, Reuters news agency reported.

The talks will focus on loans of at least $500m issued using Yuganskneftegaz oil exports as collateral, according to Reuters.

Complex purchase

Yuganskneftegaz came into Rosneft's possession after a convoluted sale, forced by tax officials to meet part of Yukos' multi-billion dollar tax bill.

The favoured buyer was partly state-owned gas giant Gazprom, but Russian oil industry watchers were startled to see it snapped up by an unknown firm.

In a move which caused rather less surprise that firm, in turn, was swallowed by Rosneft for $9bn.

Rosneft is merging with Gazprom but Yuganskneftegaz has not been included in the merger and will continue to operate separately.

Yukos said it does not consider Rosneft as the rightful owner of Yuganskneftegaz, as it "has not received any formal notification" that Rosneft has acquired the 77% stake in the oil production unit.

The tax claims against Yukos have been widely viewed inside Russia and abroad as orchestrated by the Kremlin to punish Yukos' ex boss Mikhail Khodorkovsky for supporting political rivals of President Vladimir Putin.

They are also widely seen as a means of renationalising Russia's energy industry, a pattern which will be furthered by the Rosneft-Gazprom merger.

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